CEOs do matter when picking stocks. 5 things we look for in a leader and examples from our portfolio
Our goal is to invest in businesses that make money over the long run. That's why we care so much about who is charge.
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The New York Stock Exchange (NYSE) stands in the Financial District in Manhattan on January 28, 2021 in New York City.
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It's not unusual for a company's stock price to soar — or sink — on news of a CEO shakeup. When Mary Dillon, revered on Wall Street for her eight-year run at Ulta Beauty (ULTA), was named to the top job at Foot Locker (FL) last year, the shoe retailer's stock jumped 20% in a single session. Dillon's track record of turning Ulta around is why the Club started a position in Foot Locker back in March. We hope she can work her magic again.
The reaction to Dillon's appointment highlights a CEO's outsized influence over a company's direction — and perception by the market. In fact, up to 45% of a company's performance is tied to a CEO's influence, according to estimates from McKinsey & Co. So, CEOs matter when picking stocks — and at the Club, these are the five things we look for when evaluating the leaders of our holdings.
